Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice, by 40-year veteran tax professional Robert D Flach.

Saturday, May 14, 2011

WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’

* Kay Bell tells us that National Taxpayer Advocate Nina Olsen thinks this was the “Worst Tax Season Ever” at her other blog at BANKRATE.COM.

Why? The First-Time Homebuyer’s Credit.

“I have to say this has been my worst filing season because the stories are heartbreaking," Olson told the tax attorneys. "You see this whole debacle that came from this provision that in my estimation had no business being in the Internal Revenue Code in the first place."

Kay correctly explains –

“Congress' insistence, following much pressure from the housing industry, to extend and expand this tax has been an administrative nightmare, both for taxpayers and the IRS.

The tax break was plagued by fraud, which prompted tougher verification standards, which made filing harder (no e-filing allowed for first-time homebuyer credit claimants), which produced IRS processing problems, which has left taxpayers waiting months for refunds.”

I only had one homebuyer credit during this tax season. I had more clients who took advantage of it, but did so by filing amended 2009 returns at the time of the purchase. I personally did not encounter any problems with the IRS processing of the claims.

But I do agree with Nina that, like many other refundable credits (i.e. Earned Income Credit), this provision “had no business being in the Internal Revenue Code in the first place”.

“Led by Rep. James Sensenbrenner (R-Wis.), the bipartisan group wants IRS Commissioner Doug Shulman to reevaluate the mileage rates taxpayers can use to calculate certain deductible costs of operating an automobile.”

The IRS standard mileage allowance is always a year behind the times, as it is determined “after the fact”. The current, for example, 51 cents per mile for business travel certainly does not reflect the actual current cost of operating a car. But I am wary of mid-year changes – because it means that clients have to give me two separate mileage numbers for the year. However, as this was done a couple of years ago, some clients were still giving me mileage numbers for Jan-June and July-Dec of 2010.

* Joe Kristan follows up on this issue and tells us there will be no change to the standard mileage allowances for 2011 in “IRS: Mileage Rates Staying Put” at the ROTH AND COMPANY TAX UPDATE BLOG.

“For as long as I’ve been banging away on the keyboard about tax and tax policy, I don’t believe I’ve seen anything more polarizing than the “new” health care act which was signed into law last year. From the so-called Cadillac plans to the increased 1099 reporting requirements, no single piece of legislation has generated as much email, comments and downright hullabaloo, as the Patient Protection and Affordable Care Act.”

Kelly tells us that, in Notice 2011-36, -

“The IRS has announced that they are requesting public comment on the shared responsibility provisions included in the health care act that are slated to take effect in 2014. You may recall that under the new law, “large” employers – those with 50 or more full-time employees – that do not offer affordable health coverage to their full-time employees may be required to make a shared responsibility payment. Employers under 50 employees are exempt from this requirement.”

“In a rare–some would say uncharacteristic–show of tenderness, though, the IRS Commissioner has announced an IRS review of its bright line rule that calls for denying innocent spouse relief anytime the poor woman–the requester is almost always the wife–asks for innocent spouse treatment more than two years after the first IRS attempt to collect tax.”

“It’s important to understand the ramifications of not filing a past due return and the steps that the IRS will take. Taxpayers who continue to not file a required return and fail to respond to IRS requests for a return may be considered for a variety of enforcement actions.”

At the very least the IRS will eventually construct a return for you, based on information in its matching system, using the absolute worst scenario – married filing separately if married, no dependents, no deductions or credits – regardless of how previous returns were filed, and pile on penalties and interest, including penalties and interest on the penalties and interest.

Hey, while you are at Bruce’s blog be sure to check out the Products Page.

* Chad Bordeaux takes some time off from counting beans with his wife (who for some strange reason feels compelled to tweet wherever she is at any given moment – as do other twits) to give us “Tax System - Explained With Beer”.

I, too, had seen, and probably blogged about, this analogy before – but it bears repeating because, as Chad puts it, “it is way too true”.

I have had no personal experience or contact with Ms Deutch’s business, other than skepticism about her “pennies on the dollar” tv ads, so I cannot comment on this development. I had been warned about her by other tax bloggers. And I do believe that firms claiming “pennies on the dollar” settlement of tax debt are for the most part scam artists.

I do know that her two tax blogs had often contained accurate and interesting information, and she was occasionally referenced here in the BUZZ. She had “returned the favor” by referencing TWTP posts on her blog, and a few years ago her publicist did send me a complimentary copy of her book on taxes, which I confess I have not yet read.

I do know, from the personal experience of a client, that it is very, very expensive to defend your honesty when the state or federal government, for whatever reason, are after you - even if they cannot find any actual malfeasance or chargeable activity.

The classic political example is Slick Willy. A special prosecutor could not find any wrong-doing by Hillary’s law firm, but it had to justify its existence by finding anything they could on either Clinton spouse – at tremendous cost, financial and otherwise, to the taxpayers and the country. The Slick One was charged with doing basically what just about every other President before him, except perhaps Jimmy Carter, as well as probably at least 2/3 of sitting members of Congress (I am being conservative), had done, only with more discretion.

“They prey on taxpayers with a big tax bill with a promise to get the tax authority to accept a much lower payment. The problem is they charge a large up front fee and do very little. In some cases, they do nothing. Most good tax professionals can help more and at a lower fee.”

And I support her final statement –

“Roni Deutch, American Debt Relief, J.K. Harris and Tax Masters have all spent millions to publicized they tax debt relief services and are in trouble with a variety of Federal and state agencies for misleading advertising and fraud. So, hopefully, the word is getting out that there is no easy fix to tax debt.”

* It seems that the State of Virginia offers several “sales tax holiday” periods from May through October.

From May 25-31 “purchases of items designated by the Department of Taxation as hurricane preparedness equipment, including portable generators, will be exempt from the Virginia sales tax”.

1 comment:

I'd amend the comment that innocent spouse cases are "almost always" the woman to "more often than not". That's based on a rough count of published decisions that I did. I found a decision where the guy lost (unfairly I thought)

http://riles52.blogspot.com/2010/12/and-go-down-in-flames.html

I thought that it was something rare but when I looked back I saw quite a few more.

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